My submission on the Fast-track Approvals Bill

There are some really hard-hitting submissions on the Fast-track Approvals Bill coming to light now that the select committee call for submissions has closed.

One of the best submission is from Environmental Defence Society and see their media release.

For what it's worth, here is my submission on the Fast-track Approvals Bill.

1. It is wrong immoral and unethical to cause adverse effects on the environment (damage pollution or destruction of habitats plants aninmals and ecosystems).
2. It is more unethical to damage the environment in order to make money.
3. It is even more unethical to damage the environment for money while claiming that the environment will be protected, mitigated or offset.
4. It is even a further step more unethical to damage the environment that has been legally recognised as deserving of conservation status for money while claiming that the environment will be protected, mitigated or offset.
5. It is worse again than this to also illegally downgrade and expunge the conservation status of a conservation park so a land swap could be arranged to provide for the footprint of an irrigation dam. That was the finding of the Supreme Court over the legality of the Ruataniwha project's conservation land swap proposal.
6. It is worse again to do this with no public hearing.
7. It is worse again to do this with no fact-based right of appeal.
8. It is worse again to do this when the resource exploitation is for coal - when the IEA and the IPCC say that coal reserves must be left in the ground to avoid 1.5 degrees of global warming.
9. It is worse again to destroy the habitat of endangered and threatened endemic species such as the Mt Augusta snail which was only found on the summit of Mt Augusta within the unique coal measures habitat of Buller that was destroyed by the Stockton Mine.
10. It is an order of magnitude more unethical to enact unconstitutional legislation that gives biased politicians with known funding from resource extraction industry a bundle of "Henry VIII powers" decision-making powers that allow them to bypass resource and conservation laws to approve failed resource exploitation projects that have adverse environmental effects in conservation areas.
11. This bill does not have a constitutionally valid justification. There is factually no valid "business case" for this bill.
12. It is a knee-jerk politicised reaction to the inevitable failure of highly speculative ill-advised resource exploitation that were all found to be invalid under a range of relevant statutes.
13. Going back to the John Key premiership, there were similar ridiculous projects. The tunnel to Milford under the Routeburn track, the monorail to Milford in the Snowden conservation area and the gondola to Milford via the Greenstone valley. We have a history of ridiculous resource exploitation projects.
14. Fortunately sanity and due process prevailed as the Hon Nick Smith declined approval of the first two projects.
15. The projects such as the Ruataniwha Dam, Te Kuha/Escarpment coal mine, Trans Tasman Resources marine consent, the Waitaha Morgan Gorge hydro project, all validly failed on their merits againts current statutes and policies after hearings and examination by independent decisions-makers or courts.
16. This was, as a matter of fact, not "obstruction" or "red green tape". It was not failure. It was actually proof that the suite of Aotearoa's resource laws were working as intended. To prevent adverse environmental effects on Aotearoa's special and unique environments.
17. Is it too much to ask the three Ministers that the rule of law is followed? That the relevant independent court and hearings decisions are respected?
18. Isn't the rule of law the most important attribute of a funcioning democracy?
19. Like the Trans Tasman Resources marine consent proposal for "suction mining" of the ocean floor, the bill will "suck up" the offending resource legislation blamed by the three Ministers.
20. The the relevant protective statutory considerations (which are set out in schedules to the bill) will be reduced to so much mud-like fine silt - that will then be just ignored by the three decision-making Ministers in their intemperate urgency to personally approve illegitimate and destructive projects.
21. It is just wrong and ill-liberal for the bill to give the three decision-making Ministers such direct decision-making powers in place of independent decision makers who have appropriate training and vocations.
22. The only connection the three Ministers have with resource conservation and environmental law are their links to extractive industries. That should disqualify them from being decision-makers.
23. The bill seems to have been written expressly to circumvent several resource and conservation statutes as well as the independent decision-makers.
24. It is not so much a bill, as a grab-bag of "Henry VIII powers" that allow the three Ministers to bulldoze over Aotearoa's natural resource and conservation statutes.
25. That is repugnant, abominable, egregious and morally reprehensible.
26. I request that the fast track approvals bill not be enacted.

The unbearable annual updates to the NZ ETS auction volume limits and price control settings for units 2023

The Ministry for the Environment is running a consultation on the utterly incomprehensible Annual updates to the NZ ETS limits and price control settings for units 2023.

There is a very dense 56 page consultation paper Ministry for the Environment. 2023. Annual updates to New Zealand Emissions Trading Scheme limits and price control settings for units 2023: Consultation document. Wellington: Ministry for the Environment..

This is based on another annual round of dense advice over 64 pages from the Climate Change Commission Advice on NZ ETS unit limits and price control settings for 2024-2028

I wrote a submission today. Due to the density of the reports, and the way Ministry for the Environment framed the 24 compulsory questions, it was really hard. Submissions close on 16 June 2023.

I can however try to summarise it in three charts.

The Climate Change Commission wants the Government to reduce the number of emission units it auctions from 2026 to 2028.

The Climate Change Commission wants the Government to increase the minimum price for emission units in the auctions from 2026 to 2028.

The Climate Change Commission wants the Government to increase the cost containment reserve 'maximum price' for emission units in the auctions from 2026 to 2028.

I am guessing that a Chris Hipkins led Labour Government is probably going to try to ignore the Commission's recomendations.

Russell McVeagh have the best short summary of the issues: Climate Change Commission urges Government to reduce ETS unit supply and raise trigger prices.

If it's worth paying New Zealand Steel to reduce emissions shouldn't we first stop paying them emission units to increase emissions?

The $140 million emissions subsidy to New Zealand Steel is not just corporate welfare, it's greenwashing and it's climate bright siding and it's our insane emissions trading scheme. Can we have our 16 million free emissions units back?

I am still blown away by the Government's announcement a week ago that they will pay New Zealand Steel Ltd $140 million over three years to adopt an electric arc furnace that reduces the emissions intensity of steel smelting.

I am also blown away by the over-egging of the project by the Chris Hipkins, Megan Woods and James Shaw.

Hipkins states:

“The economics of this really stack up, especially compared to current carbon prices. The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne. In the long term this saves the Government and the country money.

And I am also aghast at the largely uncritical treatment of the announcement in the media. Much comment fails to look at the NZ Steel deal in the context of our dreadful emissions trading scheme (or ETS). Some comment has included basic errors of fact such as saying New Zealand Steel is exempt from the ETS.

Massive emissions cutting deal says Luke Malpass in Stuff.

James Shaw is quoted by RNZ

"The lifetime abatement cost is forecast at $16.20 per tonne. Current carbon prices are around $55 per tonne. In the long term this saves the government and the country money."

Duncan Greive at The Spinoff calls it the beginning of a new climate pragmatism.

Duncan Greive makes this factual error.

"NZ Steel was already exempt from the Emissions Trading Scheme (ETS), having baldly stated that it would have shut the factory were it to have to pay the cost of its emissions"

No, New Zealand Steel is not exempt from the emissions trading scheme (They would be more likely to face a carbon price if they were exempt). Yes, they have threatened to close the smelter. Several times

Michael Neilson in the Herald says the initiative is remarkable.

Bernard Hickey agrees with Hipkins and says it's $140m well spent at $16.20/tonne.

Even the Lawyers for Climate Change Action, who have just filed a judicial review of the December 2022 ETS price settings decision, said "This is a great initiative"

What's the relevance of Hickey and Hipkins and Shaw comparing the predicted cost per tonne of emissions reduced with the current market price of emission units?

It's emission pricing. Carbon prices are emblematic of having an emissions trading scheme. And in theory New Zealand is big on emissions pricing.

The Ministry for the Environment keeps saying "the New Zealand Emissions Trading Scheme is the Government’s main tool for reducing greenhouse gas emissions". New Zealand has had an emissions trading scheme since 2010. It includes the steel industry.

This is the emissions pricing logic.

• NZ Steel's emissions are covered by the ETS and are priced via the mandatory surrender of emission units.
• NZ Steel has a project to reduce emissions that will cost less per tonne of emissions than the current market price.
• NZ Steel's overall emissions liability under the ETS will reduce.
• The project pays for itself as it is the lower cost option.

That's what emissions trading schemes are meant to do.

So why isn't NZ Steel paying 100% of the cost? Why is the Government paying almost half? Why are Hipkins, Wood and Shaw saying this subsidy isn't just necessary but it's good policy?

The answer is the bullshit that is the emissions trading scheme Industrial Allocation rules.

Tom Pullar-Strecker of Stuff, who seems the only skeptical voice, correctly notes New Zealand Steel would never fund the electric arc furnace as they receive so many free emission units under the ETS Industrial Allocation rules.

Pullar-Strecker has also noted that in New Zealand Steel's last annual report, it received free emission units worth $117 million. And that the chief executive stated they received so many free emission units that carbon costs were "neutralised" including indirect ETS costs from electricity prices.

Just to repeat the point again. New Zealand Steel are allocated far more free emission units than needed for their actual smelter emissions.

They have never needed to buy any additional units to comply with the ETS.

Here is the chart of actual final allocations of emission units from the EPA to NZ Steel compared to the estimated actual steel emissions from the Greenhouse Gas Inventory.

What's that mean? Buying emission units and surrendering them back to the Government annually is the essence of an emissions price.

Receiving free emission units and surrendering some of them back to the Government and keeping some each year (you are always a net seller) is the opposite of an emissions price.

Receiving free emission units is in fact payment of a subsidy for New Zealand Steel's emissions.

If New Zealand Steel increases it's emissions they receive more units

If New Zealand Steel reduces it's emissions they would receive fewer units

So if New Zealand Steel installed the electric arc furnace, and reduced emissions from its Glenbrook mill by 800,000 tonnes, they would be financially worse off as they would lose more than 800,000 emission units.

That is how insane the emissions trading scheme is.

This chart shows the $308 million value of the unit allocation subsidy to NZ Steel from 2010 to 2021 and highlighted is the Government's electric arc furnace grant of $140 million over three years 2022 to 2024.

Our emissions pricing scheme is so flawed it incentivises maintaining and increasing emissions. It is 180 degrees in the wrong direction. This is emissions trading insanity.

If it's worth paying New Zealand Steel to reduce emissions shouldn't we first stop paying them to increase emissions?

Double dip Fonterra also wants to be paid for increasing emissions and paid for reducing emissions

Data and R code.

Check this out from Radio New Zealand. No doubt following the New Zealand Steel double dip precedent, Fonterra has also got it's hand out to the Government to double dip government subsidies for both increasing and reducing emissions.

Fonterra says $100m in carbon credit costs could help pay for clean energy

Fonterra chief operating officer Fraser Whineray told Morning Report today that it was working to reduce emissions, but more government assistance would help.

At the moment, for each tonne of greenhouse gases the company must pay into the government's Emissions Trading Scheme, but Whineray said he would like to see more of that be given back to Fonterra to help it introduce more clean alternative energy sources.

"Our total off-farm emissions in New Zealand at the moment is about 1.5 - 1.6 million tonnes [per year], and so you times that by the carbon price, and that's roughly the cost of surrendering carbon for our emissions in New Zealand each year.

"The ETS is supposed to recycle funds back into decarbonisation. And if we're spending more than $100m a year on carbon credits, getting a little bit of that back to help pay for the actual projects - some of which we've got under way and some much larger ones in front of us, that sounds like a pretty reasonable starting point."

But Fonterra has been paid and continues to be paid to increase their coal thermal emissions under the 'Industrial Allocation' rules of the crazy emissions trading scheme.

Here is a bar chart of free emission units given to Fonterra under the 'Industrial Allocation' rules. The total number of units given to Fonterra over the 12 years since 2010 is 450,413 emission units.

Allocation of units is proportional to production. That method is called "output intensity" based allocation.

If Fonterra increases its production it gets more units. The allocation of units incentivises increasing emissions.

How come Fonterra doesn't mention its already being given a government hand out for maintaining and increasing its emissions?

Here is a chart of the year by year value of the free emission units given to Fonterra.

The U shaped dip reflects the collapse of carbon prices when the market was flooded by dodgy imported international 'hot air' emission units in 2012 and 2013.

The 2021 sharp upward increase in value of the allocations is caused by the 2020 changes to the emissions trading scheme. Out went paying for unit surrender liabilities with unlimited volumes of units at a fixed price of $25 per tonne. In came auctions of units four time a year.

If it's worth paying Fonterra to reduce it's emissions shouldn't we first stop paying them to increase their emissions?

New Zealand Steel reduces emissions - gets paid millions: New Zealand Steel increases emissions - gets paid millions

The Government made an extremely exaggerated announcement on Sunday 21 May 2023 that it will contribute $140 million to a New Zealand Steel project to electrify (replace coal thermal heat) their steel and iron recycling process. Thus reducing future emissions of greenhouse gases.

NZ’s biggest ever emissions reduction project unveiled the title breathlessly gushed.

If only the hyperbole flowing from the joint Government and Te Tari Tiaki Pūngao/EECA announcement matched the appalling reality of how dysfunctional New Zealand Steel's treatment is under the emissions trading scheme.

New Zealand Steel has never faced an emissions price under the emissions trading scheme.

In every year since 2010, New Zealand Steel has been allocated far more free emissions units than the number it has had to surrender back to the Government.

Here is a chart of the allocated emissions units and the estimated emissions trading scheme liability to surrender units.

The effect of the excessively generous allocation of units is to completely insulate New Zealand Steel from an emissions price.

Notwithstanding this extremely generous subsidy, New Zealand Steel still engaged in windfall arbitrage profiteering by buying international hot air emissions units back in 2012 and 2013.

The annual amount of free emissions units allocated is proportional to the steel production. If production and emissions increase, the amount of free emission units increases.

Conversely, if steel production and emissions decline, the amount of free emission units decreases. Free allocation of emission units incentivises increased emissions. And disincentivises reduced emissions.

New Zealand Steel has been allocated a total of 16 million emission units between 2010 to 2021.

New Zealand's emissions units now have an enhanced value due to the 2020 amendments to the Climate Change Response Act.

This is a chart of the annual values of the New Zealand Steel unit allocations when priced with a mean May price. May is the month when the units are transferred to New Zealand Steel's ownership.

The 16 million emissions units allocated to New Zealand Steel have a total value of $308 million. The proposed grant to reduce steel recycling emissions by electrification, is $140 million.

New Zealand Steel has already received twice as much money ($308 million vs $140 million) to maintain it's emissions, as the value of the proposed electrification grant.

That's why I say that New Zealand Steel may be getting paid to reduce emissions but it has already been paid twice as much to keep emitting.

Industrial Allocation - free emission units for big business - is worse policy than 100% industry exemption from NZ ETS

In a recent post I argued that the New Zealand emissions trading scheme industrial allocation policy exempts from emissions pricing twice as many tonnes of emissions than the total emissions counted in the Greenhouse Gas Inventory for the New Zealand industrial sector.

I have a thought experiment. Can I look at the emissions 'footprint' of the free emissions units of industry allocation through the lens of the provisional emissions budget?

The Climate Change Commission's recent recomendation on ETS settings describes how industrial allocation is treated within the emission budgetting process (page 36).

"Step 4: Account for industrial free allocation. Industrial free allocation refers to the amount of NZUs provided by the Government for free to entities whose activities are both emissions-intensive and trade-exposed (EITE). These units use up part of the emissions budget available to the NZ ETS and reduce the total amount of NZUs that the Government can sell at auction".

Therefore the emission units given to emitters have to be subtracted from the emissions budget to get to the amount of emission units available to auction.

Here is a chart of the provisional emissions budget for the years 2021 to 2025. The emissions budget calculation involves subtracting parcels of emissions to get to the amount of units to auction. For Industry Allocation, 43 million tonnes of emissions are deducted. In other words, these units are 'unpriced' or 'exempt' from pricing, the same treatment as for pastoral agriculture emissions.

What would the emissions budget look like if assumed all NZ industry emissions from the Greenhouse Gas Inventory are exempt from the emissions trading scheme?

There would be no subtraction of units for industrial allocation. Instead the emissions budget would subtract an amount of units equal to the industrial emissions from the Inventory.

This chart presents that scenario. An allocation of 27 million units is made from the emissions budget to account for all industry emissions being exempt from the emissions trading scheme. There is no allocation for industrial allocation.

Completely exempting industry from the emissions trading scheme results in a higher amount of emissions units to auction. Ninety seven million tonnes compared to 90 million tonnes over the period 2021 to 2025.

This bar chart compares the two auction volumes under industry exemption and under the status quo of industrial allocation.

As the units auctioned represents emissions priced under the emissions trading scheme, the industry exemption scenario is an unequivocally a better policy for reducing emissions than industrial allocation.

More of the endless cycle of incremental reform of the emissions trading scheme

There is a new Cabinet paper to read; "A Review of the Emissions Trading Scheme", 28 pages, by the Office of the Minister of Climate Change

What use is a Cabinet paper when the key policy options are redacted?

Last Wednesday 22 March 2023, the Ministry for the Environment announced yet another review of the My-Eyes-Glaze-Over New Zealand Emissions Trading Scheme.

For some reason, I downloaded the Cabinet paper.

For some even more masochistic reason, I actually read all 28 pages.

It was largely a waste of time.

I can't even use the metaphor that the Cabinet paper was "rearranging the deckchairs on the Titanic" as I have already used that title on a blog post on a past consultation on industrial allocation.

The first paragraph of the Cabinet paper tells us what the paper is about. So far so good.

"This paper seeks agreement to the scope and process of a review of the New Zealand Emissions Trading Scheme (NZ ETS). This review is in response to Cabinet’s decision to prioritise gross emissions reductions in New Zealand’s first emissions reduction plan (ERP), and Cabinet’s in-principle decision to at agree to the Climate Change Commission’s recommendations to strengthen the incentives for gross emissions reductions in the NZ ETS."

The fourth paragraph states;

"Enabling a just transition to a low-emissions, climate resilient future is a Government priority..."

Okay. I am all for a just transition. I'd like the transition to help those with low incomes instead of being corporate welfare for emissions intensive industry as in the case of the dreaded industrial allocation.

Back to the Cabinet paper. Who is being mean to the emissions trading scheme saying it needs more reform? It's the naughty He Pou a Rangi/Climate Change Commission. The Cabinet paper says in paragraph 50 that:

"In their 2021 advice, the Commission highlighted the risk that the NZ ETS would drive relatively low-cost net emission reductions through exotic forests, rather than gross emissions reductions needed to put us on track to net zero by 2050".

For emissions nerds who have tracked the emissions trading scheme since it's inception in 2007, this isn't just a future risk. It is exactly what has already happened in the 2008 to 2012 period of the Kyoto Protocol. Gross emissions rose in proportion to economic growth but "Net Kyoto" emissions (that included "afforestation and reforestation" sequestration credits that were not in the 1990 baseline) were less than the baseline.

This was before the fraudulent hot air emission units from Russia and Ukraine flooded into New Zealand. Here is Geoff Simmons in the Spinoff.

The Cabinet paper continues with a lot of background to the emissions trading scheme that is probably unnecessary. For example its not like Chris Hipkins would read that. He couldn't remember any details of other Cabinet papers where policies had consequences measurable in emissions.

Finally, I got to paragraph 79 on page 11. Maybe the officials who wrote the paper would finally mention where they see this reform proposal going. That would be new information. For example, what do the officials think are the possible high level options for amending the emissions trading scheme? Great, they are going to say what they think. Here is paragraph 79.

"However, in my view there is value in identifying some of the potential, high-level options Ministers may be presented as an output of the review. This will help give a sense of the kinds of options that could support balancing gross and net emissions reductions in the NZ ETS."

I turned the page expecting to be mildly enlightened. Okay that is sarcasm. It would have been nice to learn something new though.

This is paragraph 80. And 81 and 82.

Yes the potential, high-level options have been redacted! The whole point of downloading and reading the Cabinet paper was really to find out the possible options or new directions for dealing with known problems.

I kept plowing my way through the paper. Several pages are dedicated to the peculiarities of the inter-departmental 'process' to be followed. Remember the emissions trading scheme involves several government departments: principally Ministry for the Environment on policy, but also the Environmental Protection Authority for operating the emissions trading scheme, the Ministry for Primary Industries for foresty, MBIE for energy sector emissions and Ministry of Foreign Affairs and Trade for international climate agreements.

These departments interact in accordance with the their own perceptions of relevant interests. I add the observation that such interactions may not be in the direction of 'no more than 1.5C warming' or 'net zero carbon by 2050. The Cabinet paper leaves that unsaid.

However, such interactions are implicit as on page 14 paragraph 100, as the paper proposes some 'governance terms of reference' to presumably make the public servants play nicely.

I am reminded of the italian novelist Umberto Eco's explanation of the behaviour of the crusading Knights Templar religious order. The historic reality of knightly behaviour in the Holy lands was best understood by considering the order's offical commandments. For example, "thou shall not be drunk on a horse blaspheming the name of the Lord" was in fact the proof that such behaviour was the rule and not the exception.

So yes I am mildly interested in the 'governance terms of reference'. Here are the relevant paragraphs.

Yes the 'governance terms of reference' have been fucking redacted!

So I logged onto FYI.org.nz, the online transparent and open portal for requesting official information from public agencies. And I requested a complete copy of the Cabinet paper with all 26 redactions restored all their improbable glory. The 26 redactions are probably not earth-shatteringly egregious but the point of principle is - do there need to be any redactions if the Government is pursuing emissions policies consistently with their own professed value statement of a "just transition"?

I was so mad about that point that I started writing an email to Minister for Climate Change James Shaw asking him that exact question. The email turned into a three page letter. Oh well, push the send button, and try not to forget what the issue was when I finally get a reply after waiting a month or two for a reply. Of course, the same proviso applies to my Official Information Act request at FYI.org.nz. The Ministry may well extend the timeframe, or transfer the request to the Minister's office, or just ignore the timeframe - or a combination of all three.

Of course, in terms of climate change policy responses, we don't have time for this shit.